There is increasing evidence that Trump’s tariffs are working to expand American manufacturing and create jobs.
[Michele Nash- Hoff | March 6, 2019 | savingmanufacturing.com
According to the February 11, 2019 U.S. Manufacturing Technology Order Report press release of The Association for Manufacturing Technology, “The year- end order total for 2018 was $5.5 billion, up 19 percent from the annual sum for 2017…’We finished a fantastic run up in manufacturing technology orders during 2018, with most analysts looking for good growth in units and modest growth in revenue in 2019,” said AMT President Doug Woods.”
In an Op-Ed for The Hill on February 12, 2019, Michael Stumo, CEO of the coalition for a Prosperous America, wrote: “There’s no doubt that America’s manufacturers are currently rebounding. The tariffs that President Trump imposed a year ago on steel, aluminum, solar panels and washing machines have already created more than 11,000 new jobs.”
In 2016 when he was a candidate, Trump told the Washington Post that he could make the U.S. debt-free “over a period of eight years.” Thus, the question is: Are Trump’s tariffs reducing the Federal budget deficit and paying down the national debt?
For clarity, the Federal budget deficit is the annual difference between what the federal government takes in as revenue and what it spends for expenses. The U. S. has run a federal budget deficit every year since 2001 by spending more than it raises. The national debt is the total amount of money that has been borrowed and not yet repaid.
At 7 PM on March 6, 2019 when I finished writing this article, the national debt was $22.109 trillion, and the Federal budget deficit was at $846.945 billion according to the U. S. National debt clock website (it registers an increase every second.) In a CNN Business article by Lydia DePillis, on January 4, 2019, “The US national debt stood at $21.974 trillion at the end of 2018, more than $2 trillion higher than when President Donald Trump took office, according to numbers released Thursday by the Treasury Department.” On the other hand, the national debt nearly doubled under Obama’s eight-years as President going from $10.626 trillion when he was sworn on January 20, 2009 to $19.947 trillion when he left on January 20, 2017.
A Bloomberg article by Mark Niquette on January 17, 2019, states, “According to data from U.S. Customs and Border Protection, more than $13 billion in duties imposed by the Trump administration were assessed on imported goods as of Dec. 18…Customs and Border Protection collects the tariffs based on the price paid for shipments and the tariff rate in effect, and duties are charged when shipments are released into the U.S. The assessed amount now tops $13 billion, with $8 billion coming from the duties on Chinese goods…The duties are deposited in the U.S. Treasury.”
Thus, although President Trump claims that the tariffs are being paid by China and other countries, the tariffs are actually being paid to the U. S. Treasury by companies that import products.
As I wrote in my last article, tariffs were a large source of revenue for the U.S. government for over a hundred years. However, in 1913, the 16thAmendment established Congress’s right to impose a federal income tax, and tariffs have represented a smaller proportion of receipts ever since.
According to an article on the Center for Strategic International Studies website, “As of 2017, 47.9 percent of revenue came from individual income taxes, 35 percent from payroll taxes, 9 percent from corporate income taxes, 5.6 percent from other taxes, and 2.5 percent from excise taxes (taxes on specific goods like gas).” Their projections for 2018 were that of the “$3.34 trillion in revenue in FY 2018, just $40.437 billion of that is projected to come from customs duties, representing 1.21 percent of the government’s total expected receipts.”
Since nearly half of tax revenue comes from individuals, the growth of high-paying manufacturing jobs as American manufacturing expands will generate more tax revenue and lower budget deficits. Most people are unaware that it takes four to five persons paying taxes to pay for the unemployment benefits for one out of work person. Therefore, more people working and paying taxes lowers the Federal government’s expenses for unemployment compensation. In turn, more people working stimulates the economy through their increased spending and consumption.
In fact, economic growth and the tariffs have helped make up for the decline in corporate tax revenue as a result of the reduction of corporate tax rates from a high of 34 percent down to 21 percent. A Breitbart article by John Carney on January 9,2019 states, “Revenue from taxes on corporate profits declined by $9 billion or 15 percent due to the deep cuts in corporate tax rates…The decline in corporate tax revenue, however, was nearly entirely offset by a rise in tariff revenue. These jumped by $8 billion, largely because of new tariffs on steel, aluminum, and Chinese imports imposed by the Trump Administration last year.”
Carney wrote, “Fiscal year i2019 will be the first to fully incorporate the tax cuts passed by Congress and signed by President Donald Trump in 2017. The first quarter’s numbers show that tax receipts have not declined but are in fact rising, albeit at a slower pace than spending. Which means that thanks to the economic acceleration of 2018, tax cuts are close to achieving the Trump administration’s projection that they would pay for themselves.”
We know that President Trump has proposed a 25 percent tariff on $200 billion of imports from China and another 25 percent tariff on all cars and car parts. Even if the proposed tariffs get up the projected $140 billion, it would still be a long way from making up for the projected budget deficits to pay down the Federal budget deficit, much less start to pay down the national debt.
However, saving the American steel and aluminum industries, fostering the expansion of our domestic manufacturing industry, and preventing the loss of more manufacturing being transferred offshore to China is still reason enough to impose the tariffs on steel and aluminum and justify the additional tariffs on $200 billion of Chinese goods.